Economic realities? January 8, 2013

A telling piece by Brendan Howllin in the Sunday Business Post this weekend. Strange too, because of one or two glaring logical inconsistencies. Not so strange in terms of the language used which appears designed shaped for at least one element of the SBP readership. So one will learn that welfare “may well be a trap, as well as a salvation – a ceiling on the aspiration of too many of our citizens”.

True indeed, except that we live in a period of unemployment at 14.5 per cent and having come from a time of near enough full employment – as the latter term is used by economists – during the boom. In other words when work was there there were people willing to take it up. And given the dearth of employment opportunities perhaps the Minister could explain how the trap of unemployment and welfare is to be avoided given that the government itself doesn’t see the figures dipping significantly across the next number of years (and indeed their projections are based on, frankly, fantastical growth figures). Granted Howlin mentions this in the context of discussions to be had after the crisis, but given the timescale on said crisis one wonders when that will be…

And then there’s his thoughts on taxation. As mainstream social democracy crawls away with a death rattle in its throat its plight could hardly be improved when it hears the following. “If we are interested in the welfare of the less well-off we must be as concerned by the size of the pie being created as its distribution … Ultimately, you cannot tax your way out of a recession.”. And yet what about cutting expenditures as a means out of a recession. How is that working out?

But it’s the following that I find most contestable.

Howlin insists that the budget was as fair as it could be, given the economic realities faced by the government. He points to the revision of previously-planned budget cuts to health and social protection budgets.

“The most significant choices made in the budget then were taken to protect the two government departments most synonymous with social equity issues. That neither area could be fully protected is not due to government choices but the extent of the crisis in the public finances.”

And he says:

It is a source of regret to the government that we were unable to protect all payments during this budget. But the decisions were taken in the interest of fairness. Were other decisions taken, no doubt we’d be talking about them now. Both the child benefit provisions and the treatment of carers by this state are among the most generous in the European Union – and rightly so, despite the fact that we are borrowing money from our fellow member states to pay our bills.

Of course it wasn’t ‘…as fair as it could be, given the economic realities faced by the government’. The Budget was a compromise between Labour and Fine Gael. A Labour government, however detached from social democracy, would have presented a rather different balance of cuts and taxes from one led by Fine Gael – currently in a particularly right of centre configuration – or the current dispensation. Those would be, naturally, political decisions as much as economic, so to present it as a situation where what is being done is the best possible approach is fundamentally incorrect. There was nothing inevitable about the shape of the responses political and economic to the ‘realities’. And it is hardly surprising that Howlin avoids pointing to this rather unpalatable truth. Although oddly it’s implicit in his text, as when he says:

This scenario echoes the debate that took place in the government on the proposed USC increase on high earners in this budget. Labour believed that this measure was required on the basis of fairness and proportionality. Fine Gael believed – wrongly, in my view – that it would be counterproductive in terms of wealth creation.
However, given that the proposed tax would raise only €70 million out of a tax base in excess of €36 billion, it would be wrong to exaggerate the difference between the two parties. Ultimately, you cannot tax your way out of a recession.

It’s interesting to consider another question in passing. Let’s take it as given that the LP would not have governed with SF – though it will be fascinating to see how things go if the chips fall differently in 2015/2016 in terms of that. But there’s a case that could be made that the LP governing with FF had the numbers of the latter party held up, or at some future point, would have seen a somewhat less rightward tilt in the context of FFs centrist populism. Granted few of us would welcome any such coalescence, but in terms of Labour’s own positioning and self-declared goal of protection of the vulnerable, which by the way in and of itself is enormously problematic as an objective for a supposedly left wing party, it is hard to see why it would rule that out. And it will be interesting, particularly if the FF figures improve over the next couple of years to see what the LP response is to that.

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Slightly off topic, and this may have been posted elsewhere previously, but rumblings against the leadership in Labour continue to mount. Cian O’Callaghan is the latest to have a go and doesn’t pull any punches in accusing them of careerism:

Under the dictatorship of capital Ireland is moving from a welfare to a workfare state. The Labour Party is playing a crucial role in this transition; the false flag of ‘Labour’ makes the anti-social democratic moves palatable. But the numbers being fooled is diminishing, hence the grumblings from the grass roots.

Meanwhile in Navan, the Swedish mining company Boliden which owns Tara Mines, has put the 670 workers on protective notice as part of the ‘negotiation’ of reduced pay & conditions.

That’s ‘economic reality’ for you, coercive industrial relations practices wrapped up as competitiveness. A profitable company looking to extract further profit at the expense of workers simply because it feels it can do so.

Below are two links that show the conflict in Labour about this. It is becoming intellectually, politically and emotionally difficult to maintain any kind of social democracy in the face of a neo liberal consensus. Maybe a death rattle is deserved in some way. Maybe everything else is unworkable or some sort of failed ideology. We are certainly on the edge of ” recovery”. This is the point of greatest danger for the ” left”. We are told that we must now decide what kind of post recovery ireland we want. Who decides, though ? I can see clearly that a whole swathe of Irish society may be deliberately left behind by this ” recovery”. Their social welfare almost gone with their medical cards. This may be why there is no attempt to promise a restoration of these. I have always believed that the Labour Party should occupy this space but it has to be said that of the above two people the first has the most power at this point.

Cllr Dermot Lacey in the SBP.
Ireland does of course need new politics. However the simplistic notion that an old fashioned left/right divide, or the equally simplistic notion of being pro- or anti Europe, is well out of date. What we do need is a politics where the values of the left are allied to a pragmatic recognition of the facts of the real world, and the financial and fiscal realities that confront us. The left-versus rightly false ideological debate leads only to stalemate and ideology blocking progress.

As Ireland is famously an open economy I’m presuming that the ‘recovery’ assessment is based on the combination of (1) a EU/global stabilisation and (2) specifically in the Irish context an exit from the Troika bailout.

But is there an EU/global stabilisation? Certainly there has been a restructuring of the capitalist system to firmly embed private debt as sovereign debt, providing a long-term rent to the financiers from the taxes raised by states on their populations. But has it stabilised? Not in Greece, Spain, Italy.

And that restructuring has driven up unemployment, precarity for those still in work, debt, taxes, emigration, suicide levels, rates of prescription of anti-depressants. It has been a wealth grab by the 1%, at the expense of everyone else. Not just in ireland but across the developed world.

“I wouldn’t be too optimistic of a ‘recovery’ other than in the sense of some temporary stability based on a huge dampening of expectations and an acceptance of long-term immiseration”.

Yes. That’s the ironic bit of my version. But the most we can hope for is re engineering of the system to be sustainable and following some kind of social agenda, as we call it out here. At this rate we won’t even have that. We will have the Howlin version.